AAPL, AMZN on Deck Tonight. Bonds Make New Lows
10-year yields are becoming a problem
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Our View
I want to tell a quick story from back in my floor-trading days in Chicago. Many of you know of Marty Schwartz, AKA the PitBull. Well the PitBull used to put his trades in through my desk and so we talked quite often.
We’re good friends now and see each other quite a bit too. Back then though, I lived and worked in Chicago and he lived in New York City. Well, whenever I would go to NYC to meet with old and new customers, I would see PitBull as well.
Most of the time the trips were simple: I’d fly from Chicago to New York, stay at a nice hotel, meet with who I was scheduled with and fly back home. But something odd always seemed to happen when I left for New York: The markets would sell off!
Not every time of course, but it happened enough times that it got to the point where even the PitBull said something to me. “What the hell Danny, every time you come to New York, the markets crash!”
Well we may not be setting up for a crash right now, but the first two days of August haven’t exactly been a great start for the bulls. At yesterday’s low, the S&P was down about 2% so far for the month and as of 7:45 a.m. ET, we’re trading below yesterday’s low. Bonds are taking it on the chin, too.
Oh…and did I mention that I’m out of town and back in Chicago for the first time in years right now? Very superstitious
Our Lean
Yesterday, I said “we’ll see if that will be enough to ‘shake the tree’ and get us a larger pullback” and that the credit downgrade of the US may “be the ‘excuse’ for the S&P to sell off going forward.”
The more I look at this price action, the more it seems like that’s the case. The S&P has been on a tear, but now we have some negative catalysts lining up.
Bonds are still getting beat up and at new YTD lows this morning. 10-year yields hit new YTD highs yesterday and even though they backed off those highs by the close, they ended the day above 4%. They are strong this morning too, currently trading above Wednesday’s high. Upward pressure on yields is a net negative for stocks, especially tech.
Earnings reactions have been mixed within mega-cap tech, which is fine, except that this group was a huge catalyst for the S&P and Nasdaq rallies. If mega-cap tech falters — much of which will hinge on AAPL and AMZN earnings tonight — will the rest of the market be able to prop up the indices?
Weak seasonality trends and high rates (even with the Fed on pause) aren’t helping matters. It’s not the end of the world, but we could be setting up for an intermediate-term pullback/pause.
Traders positioning ahead of today’s close also have to take Friday’s pre-market jobs report into consideration as well.
Our Lean: Down almost 100 handles in two days and it wouldn’t be odd for the buyers to step in at some point. Here’s how I’m approaching the situation. If the ES can reclaim yesterday’s low at 4527.75, perhaps we can get a squeeze up to the 4550-60 area. On the downside, I expect the 4493-4503 area to be at least enough support to give us a bounce.
MiM and Daily Recap
The ES traded up to 4593.50 on Globex and opened Wednesday’s regular session at 4567.75. Right after the open, the ES traded up to 4570.25, which ended up being the session high, then flushed straight down, falling more than 30 handles to a low of 4538.75 at 10:45, bouncing back to 4551.50 at 11:30 and then rolling back over down to 4534.25 at noon. From there, the ES tried to find its footing by rallying back to 4549 — a lower high — then traded down to 4527.75 at 3:30, which marked the session low.
The ES traded 4538.75 as the 3:50 cash imbalance showed $1.5 billion for sale, traded up to 4541.50, down to 4535.25 and traded 4536.25 at 4:00. After 4:00, the ES continued to trickle lower, settling at 4534.50 at the 5:00 futures close, down 64 points or 1.4%.
Technical Edge
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NYSE Breadth: 21% Upside Volume
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Advance/Decline: 22% Advance
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VIX: ~$16.75
SPY
Yesterday the SPY broke $451.50, then this area flipped to resistance. The close wasn’t inspiring necessarily, but currently trading just below yesterday’s low, traders have to be on watch for a quick reclaim of this level ($449.35).
If we set up in that manner, bulls could have a low-risk bullish reversal setup, with a stop-loss just below today’s low.
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Pivot: $449.35
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Upside Levels: $451.50, $452.50, $453.50
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Downside Levels: $446.50 to $447, $444 to $444.50
S&P 500 — ES Futures
SPX
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Pivot: 4505
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Upside Levels: 4528.50, 4537, 4546-50
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Downside Levels: 4480, 4555-60
S&P 500 — ES Futures
Keep an eye on yesterday’s low at 4527.75. If we can shoot above it after the 9:30 open, it could fuel a move back into the 4540s and with any luck, the 4550 to 4560 area.
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Pivot: 4527.75
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Upside Levels: 4548, 4550-60, 4573
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Downside levels: 4510, 4493-4503, 4460
NQ
The 15,500 area failed as support and now the NQ is finding its footing near the 15,400 area. There we find the 200-sma on the 4-hour chart and a prior breakout area.
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Pivot: 15,430
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Upside Levels: 15,520-550, 15,625
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Downside levels: 15,340, 12,250-75
TLT
Last week, I had mentioned that if the $99s can’t hold, then the $95s could be on deck for TLT. Yesterday, the bonds made a decent stand off the lows, but back under pressure this morning and the $95s are on tap.
Let’s see if they find their footing in this area, which is the 78.6% retracement and the gap-fill level.
Open Positions
Bold are the trades with recent updates.
Italics show means the trade is closed.
Any positions that get down to ¼ or less (AKA runners) are removed from the list below and left up to you to manage. My only suggestion would be break-even (B/E) or better stops.
** = previously mentioned trade setup we are stalking.
Down to Runners in GE, CAH, LLY, ABBV, AAPL, MCD & BRK.B. Now Add META, AVGO, UBER, CRM, AMZN, CVS, AMD, TLT and YM.
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DOCN — Long from $38.25 — Small trim at $39.75 to $40 and a second trim above $40.75. Trimmed more between $45 and $47 and down to ⅓ at $49.50+
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Should have us down to a ⅓ position. I think we may be able to get $53+ out of this.
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JPM — Many are long from $143-145. This is a longer term swing. Trimmed $153s, then $157.50+ on 7/24.
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Down to ½ position vs. Break-even stop. Can make small, ~10% position trim if we see $160+
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ARKK — Long from ~$46 — trimmed near/at $50. Still carrying ⅔ to ¾ of position. Trim at ~$52
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Adding back what we trimmed if we see $45 to $46
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WMT — went weekly-up from this week’s play — Trimmed above $157.55 and then $158. Down to ½ position with trim at $160+
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Break-even stop, down to ¼ position or less at $162.50
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Look for reset trade back down to ~$158!
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CRM — I’m long CRM from $227.50. Hard stop at $221.50. Look to trim near $230, then $232.50. If we regain our entry price, can also consider a trim there as it would be a “kick save” on the (so far) failed setup.
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** XOM — watch for the monthly-up over $108.50.
Go-To Watchlist
Feel free to build your own trades off these relative strength leaders
Relative strength leaders →
(Lack of updates here but these names remain my top focus list!)
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Growth stocks ARKK — DKNG, DOCN, UPST, SHOP
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LLY, CAH
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Energy stocks — VLO, SLB, EOG
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AI stocks — NVDA, AMD, AVGO, ADBE, SMCI
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Mega cap tech — MSFT, AAPL, META, CRM
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Select retail — CMG, ELF, LULU, COST
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Homebuilders ITB — TOL, KBH, DHI
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BRK.B
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ABEV, DXCM
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Cruise stocks — RCL, CCL, NCLH
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DAL, DT, AMAT
Relative weakness leaders →
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DIS → new 52-week lows
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CF, MOS
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PFE (all vaccine gains now gone)
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EL, FL, DG
Economic Calendar
Disclaimer: Charts and analysis are for discussion and education purposes only. I am not a financial advisor, do not give financial advice and am not recommending the buying or selling of any security.
Remember: Not all setups will trigger. Not all setups will be profitable. Not all setups should be taken. These are simply the setups that I have put together for years on my own and what I watch as part of my own “game plan” coming into each day. Good luck!
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